American Funds plans to open mortgage, municipal bond funds

Capital Group Cos., the largest U.S. manager of stock mutual funds, asked regulators for permission to open its first new fixed-income products in four years.
JUL 18, 2010
Capital Group Cos., the largest U.S. manager of stock mutual funds, asked regulators for permission to open its first new fixed-income products in four years. The two funds, targeting municipal bonds issued in New York state and mortgage-related securities, would be available to investors at the beginning of December, according to the company, which filed prospectuses with the the U.S. Securities and Exchange Commission on Aug. 6. Investors, discouraged by falling equity markets, put $139.1 billion into bond mutual funds in the first half of 2010, compared with $2.64 billion into stock funds, according to research firm Morningstar Inc. in Chicago. Capital Group’s American Funds managed $835 billion, excluding money-market funds, as of June 30, with about 85 percent in stock-dominated products. The Los Angeles-based firm oversees about $1.1 trillion. “This has been part of our plan for several years,” Maura Griffin, a New York-based spokeswoman for closely held Capital Group, said in a telephone interview. “This is not a response to current market conditions.” John Smet, a senior bond fund manager with the firm, said in a November interview that Capital Group planned to expand fixed-income offerings and assets in a “5 to 10-year process.” The Standard & Poor’s 500 Index of U.S. stocks declined 3.2 percent this year through yesterday. The MSCI EAFE Index of developed non-U.S. markets fell 7.8 percent. Fund Withdrawals Morningstar, which first reported the filings today, estimated that American Funds lost $19 billion to investor withdrawals during the first half of the year. American was alone among the top 10 U.S. mutual-fund families to have net withdrawals. Vanguard Group Inc., the largest U.S. manager of stock and bond mutual funds, attracted $39.9 billion in client money during the same period. The Valley Forge, Pennsylvania-based company oversees $1.07 trillion. American Funds Mortgage Fund would invest at least 80 percent of its assets in mortgage-related securities including futures contracts, according to the proposed prospectus. Tax- Exempt Fund of New York would invest at least 80 percent in municipal bonds issued by the state, its agencies and municipalities. Fund managers acting independently will pick securities, an approach the firm has used for more than 50 years. American Funds last opened a bond fund, the Short-Term Bond Fund of America, in October 2006.

Latest News

Merrill lands four advisor teams as May recruiting data shows firm's two-way churn
Merrill lands four advisor teams as May recruiting data shows firm's two-way churn

Merrill's latest hires span Colorado to Louisiana, even as industry-wide recruiting data suggests the firm is losing almost as many advisors as it gains.

Fund manager sues Kandeo, alleges $100 million FinSocial loss
Fund manager sues Kandeo, alleges $100 million FinSocial loss

The $36 million buy allegedly hid inflated books and a $50 million diversion.

Advisor gets $200,000 from Ameriprise in 'emotional distress' lawsuit
Advisor gets $200,000 from Ameriprise in 'emotional distress' lawsuit

“An award citing emotional distress is very unusual,” an industry executive said.

Workplace financial education linked to stronger financial habits, but participation remains low
Workplace financial education linked to stronger financial habits, but participation remains low

New EBRI research found workers who participated in employer financial education reported higher confidence, literacy and financial satisfaction.

The rise of the super advisor: How AI is redefining competitive advantage in wealth management
The rise of the super advisor: How AI is redefining competitive advantage in wealth management

Beyond operational excellence, the winning advisors of the future are the ones who can reach across multiple disciplines without discarding specialist skills.

SPONSORED Direct indexing webinar targets tax-loss harvesting amid market swings

Northern Trust’s Ken Lassner shows advisors how to convert volatility into after-tax portfolio gains

SPONSORED Who builds the income when the pension disappears?

Dan Biagini of American Equity says the steady decline of pensions, longer lifespans and a reset in interest rates are rewriting how advisors build retirement income